Spending Daily | December 18, 2012

Bankrupting America Releases “‘Twas the Night Before Cliff-mas”
Bankrupting America, a project of Public Notice, today released “’Twas the Night Before Cliff-mas,” a 14-page book that parodies the famous poem “’Twas the Night Before Christmas” with a clever take on the fiscal cliff negotiations and how we came to the precipice of fiscal disaster. “‘Twas the Night before Cliff-mas” comes as a friendly reminder that as the holidays approach, so does the fiscal cliff. Click here to read “‘Twas the Night Before Cliff-mas.”

Major Entitlement Reforms Still Missing From Obama’s Latest Offer
The Associated Press reports, “President Barack Obama has agreed to curtail future cost-of-living increases for recipients of Social Security and softened his demand for higher taxes at upper income levels, narrowing differences with House Speaker John Boehner in ‘fiscal cliff’ talks, people familiar with the talks said Monday. Speaking a few hours after Obama and Boehner met at the White House, these people said the president was nowseeking a higher tax rate beginning at incomes over $400,000, up from the levels of $200,000 for individuals and $250,000 for couples that were cornerstones of his successful campaign for re-election. Obama’s willingness to reduce future cost-of-living increases in Social Security, government retirement and numerous other programs marked another clear concession to Boehner, although it came with an asterisk. The president wants lower-income recipients to receive protection against any loss from scaling back future cost-of-living increases, these officials said. … Democrats have said they would object much more strongly if the president would to accept a plan to raise the Medicare eligibility age from 65 to 67. He was ready to embrace that proposal in the earlier round of talks, but he would face opposition from congressional Democrats and the AARP as well as other groups in the current political climate.”

Boehner Moving to “Plan B”
USA Today reports, “With the ‘fiscal cliff’ looming, House Speaker John Boehner will tell fellow GOP lawmakers Tuesday that he wants to move forward with a bill that will raise tax rates for Americans making more the $1 million Plan B does not mean that Boehner has given up on negotiations with the White House, but the speaker believes that the threat of current tax rates expiring rising for all Americans is too great not to have a backup plan, according to a congressional source who was not authorized to speak on the issue.”

“Boehner offers debt-ceiling increase in cliff compromise”
The Washington Post reports, “House Speaker John A. Boehner has offered to push any fight over the federal debt limit off for a year, a concession that would deprive Republicans of leverage in the budget battle but is breathing new life into stalled talks over the year-end ‘fiscal cliff.’ The offer came Friday, according to people in both parties familiar with the talks, as part of the latest effort by Boehner (R-Ohio) to strike a deal with President Obama to replace more than $500 billion in painful deficit-reduction measures set to take effect in January. With the national debt already bumping up against a $16.4 trillion cap set last year, Congress risks a government default unless it acts to raise the debt ceiling in the next few months.”

“How to cut $100B from the defense budget”
Lawrence Korb, Alex Rothman and Max Hoffman editorialize in Politico, “In order to make a deal to avert the fiscal cliff and put the country on a more sustainable fiscal path, political leaders from both sides of the aisle agree that some cuts to discretionary spending must be part of the package. The defense budget, which accounts for about half of all discretionary spending, should bear a significant percentage of these reductions. … In order to make a deal to avert the fiscal cliff and put the country on a more sustainable fiscal path, political leaders from both sides of the aisle agree that some cuts to discretionary spending must be part of the package. The defense budget, which accounts for about half of all discretionary spending, should bear a significant percentage of these reductions.”

Military Families Worry Over Benefit Cuts
According to U.S. News and World Report, “Emerging from more than a decade at war, military families are confronting a new worry at home: the prospect that a Washington deal over federal spending cuts could chip away at military benefits long considered untouchable. … Military families and retirees worry any cuts could hurt assistance they depend on, including military health insurance, pensions or on-base services such as child care and commissaries. Military spouse Jeremy Hilton of Burke, Va. calls it ‘fear of the unknown.’”

Small-Business Owners in Michigan: “radical measures are needed to reduce the nation’s debt”
Rep. Bill Huizenga, R-Mich., and citizens in the small town of Zeeland, a city within his district, commented on excessive government spending and the prospect of higher taxes in The New York Times: “‘That is the most important caveat in this whole thing: What are we going to do with it?’ Mr. Huizenga said of new revenue. ‘Are we just going to continue to spend it? Or are we going to do something that’s meaningful and changes the way we do business here in Washington, D.C.?’ … ’I’d be willing to pay a little more tax if government is willing to stop spending excessive amounts of unwarranted money,’ said Wally Ryzenga, 71, who lives in nearby Holland and retired from a steel manufacturing business he ran. ‘The thing that really works is working for more efficiency, and that’s what I would be asking our government to do. The same as I did in my business.’” Among [Zeeland small-business owners], there was no unanimity about paying higher taxes — except that ideally they would prefer not to. And they seemed to agree that radical measures are needed to reduce the nation’s debt.”

Video: Focus on Taxes “insane,” No One Wants to be the “grownup in the room” on Spending
CNBC’s Brian Sullivan makes the case that spending and entitlements are the real cause of our fiscal mess. Click here to watch.

“How Big Deficits Became the Norm”
The Wall Street Journal writes, “Big budget deficits haven’t always been with us. From the end of the Eisenhower years through the Carter presidency, the deficit averaged a modest 1.4% of the nation’s economic output. The budget was nearly balanced in seven of the 20 years from 1960 to 1979. And, as Bill Clinton reminds at every opportunity, the U.S. government was in surplus for four years at the end of his presidency. … When the CBO looked back over the decade in January 2012, it counted deficits that summed to nearly $6.2 trillion. It was off by about $12 trillion over 10 years. What happened? How did the U.S. spend more than $1 trillion above what it collected in revenue in each of the past four years…?”

Medicare Means-Testing for Fiscal Cliff Deal?
The Hill reports, “Democrats wary of accepting any entitlement benefits cuts are asking Republicans to show them their plans if they want to make  Medicare means-testing a part of a lame-duck fiscal package. GOP leaders have floated the idea of hiking Medicare costs for wealthier beneficiaries – a proposal President Obama has repeatedly backed – as a condition of any deal to prevent a slew of tax hikes and spending cuts from taking hold Jan. 1. But Speaker John Boehner (R-Ohio), the GOP’s point man in the negotiations, has declined to specify the Republicans’ wish-list for entitlement reform – at least publicly. And it’s unclear whether means-testing would be enough to win GOP support for a deal that would also hike tax rates on households with annual family income above $250,000.”

2014 Budget Already Delayed
Politico reports, “The year-end budget impasse is being felt already in 2014. The White House confirmed to POLITICO Sunday that it has deliberately slowed preparations for President Barack Obama’s fiscal 2014 budget until it has a better fix on the current talks with Republicans in Congress. The customarylate November pass-backs from the Office of Management and Budget—telling federal agencies what resources they can expect to get in the the president’s request—have been put on hold. ‘Yes.  OMB has held off on pass-backs to agencies to determine if adjustments will be needed based on the current negotiations,’ an administration official said after POLITICO asked about the delay.”

Credit-Rating Agencies Eye U.S. Debt Burden
The Wall Street Journal reports, “As far as the U.S. credit-rating firms are concerned, Washington can send the country over the ‘fiscal cliff.’ Holding their fire for now, the firms are keeping a much closer eye on whether another looming debate is resolved—the need to raise the U.S. debt limit by February or March. … Wall Street and Capitol Hill are on edge over lawmakers’ ability to reach a budget deal before year’s end. Recent conversations between President Barack Obama and House Speaker John Boehner (R., Ohio) have hinted at a possible breakthrough to avoid the coming spending cuts and tax increases, and both sides are voicing rare optimism about a deal.”

“Foreign holdings of US Debt hit record $5.48T”
The Associated Press reports, “Foreign ownership of U.S. Treasury securities rose to a record level in October, a sign that overseas investors remain confident in U.S. debt despite a potential budget crisis. … Still, the increase of $6 billion was the weakest since total holdings fell in December 2011. China, the largest holder of U.S. government debt, increased its holdings slightly to $1.16 trillion. Japan, the second-largest holder, boosted its holdings by a smaller amount to $1.13 trillion. Brazil, the country with the third-largest holdings, increased its total to $255.2 billion. The new figures show that investors are still seeking the perceived safety of U.S. Treasurys, even as lawmakers and President Barack Obama remain at odds over whether to raise the U.S. borrowing limit as part of a broader budget deal. But economists also said the slowdown in purchases of Treasury securities suggests that investors are more willing to buy other debt, including from European governments.”